10th UBAYA INTERNATIONAL ANNUAL SYMPOSIUM ON MANAGEMENT
EFFECT CAPITAL ADEQUANCY RATIO (CAR) AND NON PERFORMING LOAN (NPL) ON
RETURN ON ASSET (ROA) BANKING IN INDONESIA
(Survey on Indonesia Stock Exchange /IDX)
Rima Rachmawati
Lecturer of Faculty Economy at Widyatama University-Indonesia
Doctoral Student at Padjadjaran University
E-mail : rachmawati.rima@yahoo.com, mobile phone : +6281572997995
Priska Amelia
Accounting Students
Abstract
The Study will examine the effect of CAR an the level of NPL to ROA on the banks contained in
ISE. The research using multiple linier regression analysis model, using data processing program PASW
statistic 18.
The test results showed that simultaneous CAR and NPL had on significant effect on ROA. While
testing partial show that CAR doesn’t have a significant effect on ROA, but NPL have significant effect on
ROA.
Keywords : Capital Adquacy Ratio (CAR), Non Performing Loan (NPL), Return on Asset (ROA).
Background
The word of banking is very important place in the economy of the country, because of the
importance of the role of banks in the performance of the function it needs to be well and properly. It aims
to maintain customer confidence in the banking system. One of the rules that need to be made to regulate
the banking system is the regulation of bank capital that serves as a buffer against potential losses
(www.bi.go.id).
The crisis in the banking sector in 1997, either directly or indirectly related to the activities normally
performed by the banking industry it self. Fund-raising activities conducted by the banking industry will
affect stability of the banking industry.
A bank operations can be good if the bank has sufficient capital. Because capital is very infortant
factor in business development bank. Assessment of capital to banks based on the Capital Adequacy
Ratio (CAR) is a ratio minimum capital obligations that must be owned by the bank.
Health is the influenced by the level of bank capital bank liquidity, the bank’s ability to meet its shortterm obligations or liability that is due. Banks can not optimize its capital if banks keep liquidity is too high
it will be a lot of idle funds, so the profitability is low. Profitability is low, then the bank will not be able to
increase its capital. Bank capital is not optimal, so that the bank will not be able to meet the standards of
a healthy CAR. So that CAR is also closely linked to liquidity conditions (Dendawijaya,2005).
As examples of cases in Indonesia related to the closing of a bank because of the erosion of CAR
due to the level of NPL, which has exceeded the maximum limit set by Bank Indonesia (BI), amounting to
5% is a case of IFI Bank. Revocation IFI Bank done because the bank health continued to deteriorate,
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while the owner was also able to recue or selling shares. Market with a statutory violation (in Indonesia
Giro Wajib Minimum / GWM) and up to 24 percent surge in NPL. In effect, the IFI’s CAR falls below 8
percent minimum requirement so that in September 2008 entry under special supervision by Bank
Indonesia.
By knowing the level of CAR, NPL and ROA, it can be seen the financial performance of each bank,
if the bank has been working efficiently and can also be shown the soundness of the bank.
Problem are identified as follows :
1. Is the CAR and NPL simulataneously influence the ROA on banking companies listing on IDX?
2. Is the CAR and NPL an effect partially on ROA on banking companies listing on IDX?
Purpose of the study as follows:
1. Know effect simultaneously CAR and NPL on ROA banking listing on IDX.
2. Know effect partially CAR and NPL on ROA banking listing on IDX.
Theory
A. Bank Risks
The types of banking business risks can be divide as follows :
a.
b.
c.
d.
e.
f.
g.
h.
i.
Credit risk
Economic risk
Risk of government policy changes
Liquidity risk
Operational risk
Competition risk
Risk of insufficient capital
Foreign Exchange risk
Risk technology
B. Type of Financial Ratios Bank
According Kasmir (2008), the type of financial ratios that are common to the bank are as follows :
a. Liquidity ratios is a ratio to measure the bank’s ability to meet its short-term obligations at the time
billed.
b. Solvency ratios is a measure of the ability of banks to source funds to finance their activities.
c.
Profitability ratios are often caleed profitabilitas effort. This ratio is used to measure the level of
business efficiency and profitability achieved by the banks concerned.
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C. Capital Adequancy Ratio (CAR)
CAR by Riyadi (2008) is the ratio of the minimum capital obligations that must be owned by the bank.
For the current minimum CAR of 8% of Weighted Assets Ratio (in Indonesia Aktiva Tertimbang
Menurut Resiko / ATMR), or couple with market risk, it depends on the condition of the bank
concerned. CAR stipulated by BI, referring to the provision / International standards issued by the
Bankin for International Settlements (BIS). The formula for calculating CAR is a follows :
D. Non Performing Loan (NPL)
NPL is the possibility of failure or repayment of credit provided by the bank. BI through BI’s regulation
provides that the ratio of NPLs amounted to 5%. NPL can be formulated as follows (Joseph and
Hanifah, 2006)
E. Profitability
Profitability demonstrate the company’s ability to earn a profit or the extent to which the effectiveness
of the management company for a profit. Sartono (2002) argues that the profitability is a follows: “the
profitability of a company’s ability to earn a profit in relation to sales, total assets or equity”.
ROA is a profitability ratio that shows the comparison between income (before taxes) to total bank
assets, this ratio shows the efficiency of the management of the assets by the bank concerned. ROA
can be formulated as follows (Riyadi,2006) :
The subject of this study is banking companies listed on IDX, with the creteria specified in the study were
banking company that publishes financial report for the past 5 years or since 2006 and belongs to the
largest 10 banks by assets and market share released by BI in 2010, the study subjects were obtained by
9 banking firm. Banking companies are:
1.
2.
3.
4.
5.
6.
7.
8.
9.
PT Bank Mandiri Tbk
PT Bank Rakyat Indonesia Tbk
PT Bank Central Asia Tbk
PT Bank Negara Indonesia Tbk
PT Bank CIMB Niaga Tbk
PT Bank Danamon Tbk
PT Bank Pan Indonesia Tbk
PT Bank Permata Tbk
PT Bank International Indonesia Tbk
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Description of CAR
The CAR is one of the important factors in the development of businesses in accommodating the risk of
loss, the higher the CAR, the more powerful the ability of the bank to assume the risk of any credit or
productive assets at risk. Under the terms of the BI No.10/15/PBI/2008 CAR of Banks effect January 1,
2009 states that the minimum capital requirement of 8% of Risk Weighted Assets (RWA). CAR can be
calculated by dividing the capital to RWA. Here is an overview of data development CAR of the banking
sector on 9 companies listed in the IDX 2006 to 2010.
Table 1. Trends of Capital Adequancy Ratio (CAR)
Year
No
1
2
3
4
5
6
7
8
9
Statistical
Issuers
2006
2007
2008
2009
2010
Average
BMRI
25,3
21,1
15,7
15,6
14,7
18,48
BBRI
18,82
15,48
13,18
13,2
13,76
14,88
BBCA
22,1
19,2
15,8
15,3
13,5
17,18
BBNI
15,3
15,7
13,5
13,8
18,6
15,38
BNGA
18,88
17,03
15,59
13,53
13,24
15,66
BDMN
20,8
20,3
15,4
20,7
16,0
18,64
PNBM
29,47
21,58
20,31
21,79
16,58
21,94
BNLI
13,5
13,3
10,8
12,2
14,1
12,78
BNII
23,34
20,19
19,44
14,71
12,65
18,06
Rata-Rata
20,83
18,2
15,52
15,65
14,79
17
Source : results by researcher
Table 1 shows that the average CAR at the Bank Pan Indonesia is the largest among the nine banking
companies during the year 2006 to the 2010, average of 21,94% annually. Out second followed by a CAR
of Bank danamon, which is an average of 18,64% annually. Thing visible on the opposite Bank Permata
where CAR reached an average of only 12,78% annually, though the CAR of Bank Permata still greater
than the minimum threshold set by BI, amounting to 8%.
Description of NPL
Non-performing loans is the ratio of non-performing earning assets divided by total bank loans. NPL
maximum limit allowed by BI at this time is a maximum of 5%, if a bank’s NPL exceeds 5% then this will
affect the soundness of the bank’s assessment, which will reduce the value/score obtained. The higher
level of NPLs at a bank, it indicates that banks are not professionals in the management of credit, as well
as giving an indication that the level of risk bank loan is quite high.
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Table 2. Trends of NPL
Year
No
1
2
3
4
5
6
7
8
9
Statistical
Issuers
2006
2007
2008
2009
2010
Average
BMRI
16,3
7,2
4,7
2,8
2,4
6,68
BBRI
4,81
3,44
2,80
3,52
2,78
3,47
BBCA
1,3
0,8
0,6
0,7
0,6
0,8
BBNI
10,5
8,2
4,9
4,7
4,3
6,52
BNGA
3,08
3,03
2,50
3,06
2,53
2,84
BDMN
3,3
2,3
2,3
4,5
3,0
3,08
PNBM
7,95
3,06
4,34
3,15
4,36
4,57
BNLI
6,4
4,6
3,5
4,0
2,7
4,24
BNII
5,03
2,92
3,20
2,42
3,09
3,33
Rata-Rata
6,5
3,9
3,2
3,2
2,8
3,9
Source : results by researcher
Table 2 shows that the average level of NPL at Bank mandiri is the largest among the nine banks
during 2006 to 2010, is an average of 6,68% annually. Second best followes by the level of NPL of Bank
Negara Indonesia, which is an average of 6,52% annually. Things contradiction seen in Bank central
Asia, where the average credit problems will only reach 0,8% annually. The Bank CIMB Niaga with the
average level of credit problems will only reach 2,84% annually.
In total average NPL 9 banking companies that were visited during the study period of 2006 to 2010 is
3,9% and the rate of NPL declined during the period 2006 to 2010. NPLs of 9 banking companies tend to
decline during the period 2006 to 2010 and still below the maximum NPL set by BI, amounting to 5%. So
it can be concluded that in general the condition of the banking sector NPL 9 companies are pretty good.
Description ROA
One indicator are used by companies to measure the ability of bank management to gain or profit as a
whole is one of them by measuring the level of ROA. ROA ia a profitability ratio that shows the
comparison income (before tax) with the total assets of te bank. The larger the ROA a bank, the greater
the level of profits earned by the asset.
These data development ROA in 9 companies of the banking sector sample aouthors listed on the IDX
from 2006-2010.
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Table 3. Trends of Profitability
Year
No
1
2
3
4
5
6
7
8
9
Statistical
Issuers
2006
2007
2008
2009
2010
Average
BMRI
1,1
2,3
2,5
3,0
3,4
2,46
BBRI
4,36
4,61
4,18
3,73
4,64
4,30
BBCA
3,8
3,3
3,4
3,4
3,5
3,48
BBNI
1,9
0,9
1,1
1,7
2,5
1,62
BNGA
2,09
2,49
1,10
2,10
2,75
2,10
BDMN
1,78
2,43
1,52
1,50
2,79
2,00
PNBM
2,78
3,14
1,75
1,78
1,87
2,26
BNLI
1,2
1,9
1,7
1,4
1,9
1,62
BNII
1,43
1,12
1,23
(0,05)
1,01
0,94
Rata-Rata
2,27
2,46
2,05
2,06
2,7
2,31
Source : results by researcher
Table 3 show that the average profitability as measured by ROA at Bank Rakyat Indonesia is the largest
among the nine banking companies along 2006 to 2010, average of 4,3% annually. While second best
followed by the average profitability of Bank Central Asia, which is an average profitability reaching 3,48%
per year during 2006 to 2010. Things contradictions seen in Bank Negara Indonesia and bank Permata
the average profitability of 1,62% annually.
Overall the average profitability of acquired 9 companies of the banking sector as sample showed 2,31%
rate. However, in 2006 to 2008 the average profitability acquired 9 companies banking sector has
decreased. But in the year 2009 to 2010 an average of 9 companies profitability of the banking sector has
increased. This means that in the year 2009 to the year 2010, the bank’s management was able to
manage existing assets so well that the average profitability for the year increased.
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Effect of CAR and the NPL againts the ROA and Multiple Regression Analysis
Multiple linear regression analysis is used to determine how much influence the independent variable on
the dependent variable. The main purpose of multiple regression analysis wa performed to measure
quantitatively the influence of change in the dependent variable based on the value of the independent
variable. In this study, the dependent variable is ROA, while the independent variable is CAR as
measures by capital devided by risk-weighted figures (RWA) and NPL were measured from nonperforming earning assets divided by total loans. The following are the results of the analysis carried by
PSAW statistics 18 :
Regression model linier are as follows :
ROA = 0,24 + 0,28 CAR – 0,148 NPL
It can be explained as follows :
1.
α = constant of 0,24 menas that if all the independent variable (CAR and NPL) held constant (at 0),
then the value of ROA of 0,24.
2. Capital Adequacy Ratio (CAR) of 0,28 means that if the CAR increased by 1 while the othet variable
held constant then the Return on Asset would have incresed 0,28.
3. Non Performing Loan (NPL) of -0,148 means that if the (Non Performing Loan) incresed by 1 while
the other variables held constant then the Return on Asset decrease 0,148.
Result
Based on the research and discussion about the effect of the CAR and NPL to ROA in the year 2006 to
2010 banking sector companies listed on the IDX, then at the end of the study, the author draw the
following conclusions and recommendations:
1.
Effect of CAR and NPL to ROA using the Simultaneous testing (tes statistics F)
F test is used to test the overall regression coefficients to determine the meaning of the relationship
between independent variables and related variable. Hypothesis tested is as follows
Ho : β0 = β1 = β2 = 0, meaning that there is no significant effect of the independent variables are
simultaneously CAR (X1) dan NPL (X2) to dependent variable ROA (Y).
H1 : β0 ≠ β1 ≠ β2 ≠ 0, meaning that there is significant effect of the independent variables are
simultaneously CAR (X1) dan NPL (X2) to dependent variable ROA (Y)
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Fcount 2,843 with significance = 0,069. Than F count (2,843) is samller than the F table 3,220. This
suggests the conclusion that Ho accepted by CAR and NPL simultaneously does not have significant
effect on ROA. The conclusion is supported by the significant value that indicates the value of 0,069
is greater than the value of α = 0,05 means that the influence of the independent variables are jointly
insignificant.
2.
Effect of CAR on ROA
T statictical test used to examine the effect of independent variables on dependent varibles
individually. If the value sig.t < sig (0,05) or if t count > t tabel means dependent variable individu effect
on the dependent variable.
Ho : β1 = 0, meaning that there is no significant effect between of CAR (X1) to the ROA (Y).
H1 : β1 ≠ 0, meaning that there is significant effect between of CAR (X1) to the ROA (Y).
The result obtained t count of 0,641 with a significance value = 0,525. Compare with the value of t tabel
is Df = n – k = 45 – 3 = 42 is 2,021. T count 0,642 < t table 2,021, means Ho received the statement on
the level of 95% is not the effect of CAR to ROA.This is consistent with the value of a statistical test
of significance 0,525 > 0,05.
3.
Effect of NPL on ROA
T statistical test used to examine the effect of independent variables on dependent variable
individually. If the value sig.t < level of significance (0,05) or if t count > t table the dependent variable
individu effect the dependent variable.
Ho : β1 = 0, meaning that there is no significant effect between the NPL (X2) to ROA (Y).
H1 : β1 ≠ 0, meaning that there is significant effect between of CAR (X1) to the ROA (Y).
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The result obtained t count of -2,376 with a significance value = 0,022. Compared eith the value of t
table is Df = n – k = 45 – 3 = 42 is 2,021. T count -2,376 < t table -2,021, means Ho rejected with the
statement at the level of 95% of the influence on ROA.This is consistent with the value of a
stattistical test of signficance 0,022 > 0,05.
4.
Coefficient of determination is value expressed great influence jointly independent variable on the
dependent variable. Problem studied the influence of the ROA. ROA and NPL in the banking
company in 2006 to 2010 in exchange coeficient of determination obtained as follows :
R-square value of 0,119 indicated that the two indepent variables consisting of CAR and NPL
simultaneously able to explain the changes in ROA of 11,9%. While the remaining 88,1% were other
factors beyond the CAR and NPL.
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